2024 (2) TMI 500 - AT - Service Tax

Demand of differential duty - change/increase in the tax rate of Service Tax from 5% to 8% - point of Taxation Rules, 2012 - services rendered by the Appellant prior to 14/5/2003 - time limitation - HELD THAT - The very issue was before the Hon ble Delhi High Court in the case of CST Vs. Consulting Engineering Services 2013 (1) TMI 434 - DELHI HIGH COURT , wherein, the Hon ble High Court has held Since the taxable event in the present case took place prior to 14-5-2003, the rate of tax applicable prior to that date would be the one that would apply. In the present case, the rate of 5% would be applicable and not the rate of 8% - the demand set aside on merits. Time Limitation - HELD THAT - There are force in the Appellant s submission that there was no cause for the Revenue to issue the Show Cause Notice in 2008, for the services provided by the Appellant prior to 30/05/2003, wherein the invoices amounts were realized latest by August 2004. At that particular point of time, in the absence of any specific Rule coming into play, it was left to the interpretation of the Appellant and the Revenue. In such a case, the Department cannot fasten the suppression clause on the Appellant. Therefore, the confirmed demand is liable to be set aside even on account of limitation also. The Appeal is allowed both on merits and on account of time bar.

Summary

Issues involved: Determination of Service Tax rate change impact on invoices realization period, interpretation of taxation rules, time limitation for demand raised.

Issue 1: Service Tax rate change impact on invoices realization period
The Appellant, a provider of Consulting Engineer Services, faced a demand for paying the differential duty due to a change in Service Tax rate from 5% to 8%. The Department contended that the Appellant should pay the differential duty for amounts realized post the rate change. The Appellant argued that as per Commr. of Service Tax Vs. Consulting Engineering Services (I) Pvt. Ltd., if bills were raised before the rate change, Service Tax should be paid at the old rate. The Tribunal, citing the Delhi High Court case, held that since the services were provided and bills raised before the rate change, the old rate of 5% applied, not the new rate of 8%. Consequently, the confirmed demands were set aside on merits.

Issue 2: Interpretation of taxation rules and time limitation
The Appellant highlighted the absence of specific Rules regarding the treatment of modified Service Tax rates during rate changes at the time of the transactions. They argued that the demand was time-barred as the Show Cause Notice was issued much later when all details were already available with the Department. The Tribunal agreed with the Appellant, stating that in the absence of specific Rules, the issue was one of interpretation. They held that the Department could not impose the suppression clause on the Appellant due to the lack of clarity in rules. Therefore, the confirmed demand was set aside on account of time limitation as well. The Appeal was allowed on both merits and time bar, providing consequential relief as per law.